a. Assume that your company has bonds with a market rate of return of 10% and equity
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a. Assume that your company has bonds with a market rate of return of 10% and equity with a required rate of return of 12%. Why does the debt have a lower required rate of return than the equity?
b. The company has a rate of return on equity of 9.5% and a rate of return on debt of 7% and rate of return on preferred shares of 7.5%. If the company's capital structure is 50% equity, 40% debt, and 10% preferred shares. Assuming tax on debt = 20%, but no tax on anything else, what is the Weighted Average Cost of Capital (WACC)?
c. Name the individuals that: Prepares the annual financial statements of a company? Reviews the annual financial statements of a company? Approves the annual financial statement of a company?
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